MRiT guide to conducting physical risk analysis

Compliance with Technical Qualification Criteria - a challenge for the construction and real estate sectors 

Regulation (EU) 2020/852 of the European Parliament and the Council on the establishment of a framework to facilitate sustainable investment, known more broadly as the EU Taxonomy, requires companies subject to the reporting obligation to develop a taxonomy disclosure. In practice, this means identifying which activities qualify for the Taxonomy and then assessing whether they meet the Technical Qualification Criteria (TCQs) set forth in Commission Delegated Regulations (EU) 2021/2139 and 2023/2486. 

TKK includes technical requirements linked to six environmental objectives EU Taxonomy. In practice, it is a significant challenge for the construction and real estate sector to meet these requirements - especially in terms of criteria that have not previously been addressed in building design and construction regulations.  

Analysis of climate risks - an increasingly urgent topic 

One such new area is climate change adaptation, requiring an analysis of physical climate risks for each investment. The guidelines in Appendix A of the Delegated Regulations on how to conduct a climate risk analysis are quite general and do not indicate a specific methodology for the study. However, it is worth remembering that the conclusions of the study may lead to the need to develop an adaptation plan, which may subsequently involve long-term adaptation costs. For this reason, the correct conduct of a climate risk analysis is an important task for teams involved in investment compliance with the TKK.  

Climate risk analysis is the process of assessing the extent to which a property or construction activity is exposed to the physical hazards of climate change. It involves identifying risks such as heat waves, floods, high winds, intense precipitation or droughts, and then assessing their potential impact on a particular building or development, taking into account the climate scenarios (RCP/SSP) developed by the IPCC. 

Key terms in this context are: 

• exposure (the degree of exposure of the property to a given hazard),  

• sensitivity (features of a building that affect its vulnerability to damage) and  

• climate risk being the product of these two factors and the probability of the event. 

MRiT guide to conducting physical risk analysis 

The 114-page guide published by MRiT takes the reader through the steps of the analysis - from determining the context and location of the property, to identifying risks and selecting climate scenarios, to assessing risks and preparing an adaptation plan. The study also includes practical examples of adaptation solutions, guidance on data sources (including Klimada 2.0, Copernicus, IMGW), and an overview of applicable legislation. 

The guide is aimed primarily at non-financial companies in the construction and real estate sectors, but can also support financial institutions in shaping their approach to ESG risks and required disclosures. The document is educational in nature - the examples and approaches presented herein do not constitute formal recommendations or recommendations. 

The guide is available for download on the website of the Ministry of Development and Technology. 

Analysis of climate risks in line with the EU Taxonomy in MATERIALITY 

MATERIALITY experts are actively involved in shaping market practice for the EU Taxonomy - both as members of the EU Taxonomy Working Group at the Ministry of the Interior and through years of experience resulting from daily consulting work with clients.  

If your organization is facing the challenge of conducting an analysis risks Climate or taxonomic disclosure preparation - we invite you to contact.